Universal life insurance, explained plainly.

What it is

Flexible premiums and a cash value.

Universal life treats the premium, the death benefit and the cash value separately, so you can change or skip premiums, or change the death benefit, more easily than with other policies.

Premiums and interest are credited to a fund. Charges for expenses and the cost of insurance are taken out of that fund.

Guaranteed universal life: some policies have a no-lapse provision that keeps the policy in effect even if your premiums don’t cover the cost of insurance, as long as you pay your premiums on time. Paying only the minimum premium won’t build much cash value.

Indexed universal life: a type of universal life whose interest follows a set stock index, such as the S&P 500. You don’t pick your own funds.

Things to know

• If your premiums are lower than the cost of insurance, the difference comes out of the cash value. If the cash value reaches zero, the policy could lapse.
• Changing your premiums or death benefit can affect how long your coverage lasts.
• The cash value is what you’ve paid in, minus fees and insurance costs. These policies can be complex and come with fees.
• Illustrations show some amounts the policy promises and some it doesn’t. The ones it doesn’t promise are only projections, not a promise of performance.